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Home My WebLink About02/06/2007, C5 - RESOLUTION TO ADOPT A COMPENSATION PHILOSOPHY council "a6"D� 2-6 -07 j agenda Repoizt 1�N..b. Cs CITY O F SAN LUIS O B I S P O FROM: Monica Irons, Director of Human Resources'1' SUBJECT: RESOLUTION TO ADOPT A COMPENSATION PHILOSOPHY CAO RECOMMENDATION Adopt a resolution establishing a compensation philosophy for the City of San Luis Obispo. DISCUSSION Summary of the City's Proposed Philosophy The proposed compensation philosophy establishes an overarching goal for the City's pay and benefit plans, which is to provide"competitive compensation as part of an overall strategy of attracting and retaining highly qualified employees who exemplify our organizational values". The philosophy acknowledges attracting and retaining employees is the result of a comprehensive strategic approach, and competitive compensation is not the only solution to this objective. The City continues its commitment to succession planning,training, development, and organizational effectiveness as part of this overall strategic approach. However, compensation is also important, and the proposed philosophy targets the City's market pay position as "competitive". Background The City delivers customer service to the citizens of San Luis Obispo similar to a business delivering products to its customers. The City's "product", customer service, is delivered through its employees. Therefore, the experience and skill level of City employees directly impacts the quality of services delivered to citizens. During the past three years, the City has experienced increasing difficulty in attracting and retaining qualified employees. Data indicates recruitment and retention issues are broad-based within the City. Approximately 20% of the regular employees hired in 2004 and:2005 were no longer employed with the City after one year. The City has experienced vacancies for extended periods due to an inability to attract qualified candidates. A benchmark study of City service levels conducted in January 2006 included a brief comparison of City compensation and benefits to comparable cities. The salary data indicated nine of twelve City classifications were lower than the average of the eight cities surveyed. The City's contribution to health insurance was approximately 36%lower than the average of the cities surveyed. GSA Fttablishing a Compensation Philosophy Page 2 More detailed information is needed to understand what; if any, changes to City compensation and benefit plans are necessary in order to ensure the ability to attract and retain qualified employees who exemplify our organizational values and high standards. In August 2006, the City began a comprehensive compensation study for general services, confidential, management, and department head job classifications. Public safety classifications are not part of this study. Human Resources staff is leading the study with input from an employee committee and a consultant, Geoffrey Rothman of Renee Sloan Holtzman and Sakai LLP. Mr. Rothman has extensive experience in public sector compensation and has provided Human Resources staff and the committee with an objective process for gathering and reviewing market data. Prior to considering results from the compensation study, Mr. Rothman suggested the City adopt a compensation philosophy as an important oundation in guiding the preparation and evaluation of this analysis. What Does a Compensation Philosophy Accomplish for the City? The compensation philosophy identifies the objective of the City's pay and benefit plans. Stated simply, the City's objective is to provide competitive compensation as part of an overall strategy to attract and retain highly qualified employees who exemplify the organizational values. The proposed philosophy further establishes a consistent methodology for determining whether or not the City's plans are competitive. In addition, the philosophy establishes a broad framework for City Council, citizens, and employees, to guide and understand decisions that affect pay and benefit plans. It is designed to reflect the importance public employees play in the delivery of services and programs to the community, while retaining appropriate flexibility for decision-makers; taking local circumstances such as fiscal health and community acceptance into consideration. Therefore, unlike some other jurisdictions, the proposed philosophy assures that our compensation decisions are not on "auto-pilot" or contractually anchored to formulas or indexes. Next Steps If adopted by the Council, the compensation philosophy will be broadly communicated to employees and ultimately used to guide decisions around compensation and benefits. Specifically, when results of the current compensation study are prepared, recommendations will be considered in light of this philosophy. Going forward, the methodology set forth in this philosophy will guide future compensation studies. The compensation philosophy will be periodically reviewed to assess how it supports the City's long-term goals, strategies, and whether the philosophy is realistic and achievable. FISCAL IMPACT There is no fiscal impact of adopting a compensation philosophy. G:\agenda reports\2007\CompPhilo02_O6wKeninput.doc Establishing a Compensation Philosophy Page 3 ALTERNATIVES 1. Council may choose not to adopt a compensation philosophy and thus not create written guidelines for future decision-making around compensation and benefit plans. This alternative is not recommended as the guidelines offered in the compensation philosophy will provide consistency in making future decisions, and will document our purpose and methodology. 2. Council may elect to modify the proposed compensation philosophy. If Council chooses this alternative, staff requests that Council provide direction as appropriate. ATTACHMENT Resolution GAagenda reports\2007\CompPhilo02_06wKeninput.doc —3 AMCHMM 1 i RESOLUTION NO. (2007 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ADOPTING ITS COMPENSATION PHILOSOPHY WHEREAS,the City of San Luis Obispo strives to provide excellent service to the community at all times, and supports this standard by promoting organizational values including customer service,productivity, accountability, innovation, initiative, stewardship, and ethics; and WHEREAS,to achieve our service standards, the City must attract and retain highly qualified employees who exemplify our organizational values; and WHEREAS, fostering an environment attractive to such employees depends upon many factors, including a competitive compensation program. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo that the City's compensation philosophy is adopted as follows: SECTION 1. The City is committed to providing competitive compensation as part of an overall strategy of attracting and retaining highly qualified employees who exemplify our organizational values. SECTION 2. The City's compensation philosophy is based on both intemal and external considerations, including internal relationships, the relative labor market, fiscal health, and other relevant factors as follows; A. "Internal relationships"refer to the relative value of classifications to one another as determined by the City. Classifications performing comparable duties, with comparable responsibilities,requiring a similar level of skill, knowledge, ability, and judgment, will be valued similarly in the City's compensation structures. B. In determining the"relative labor market," the City will consider public sector agencies with several comparable demographic data points including but not limited to population, median home price,median household income, median age,median education level, services provided, and unemployment rate. In evaluating market competitiveness with the relevant labor market,the City will consider total compensation,including but not limited to salary,health, retirement, and time off benefits. C. The City's fiscal health will guide all compensation practices; thus,the City's financial condition, competing service priorities, fund reserve levels, and revenue projections will be considered prior to implementing changes in compensation. D. Other relevant factors may include unforeseen economic changes, natural disasters, states of emergency, changes in City services, changes in regulatory or legal requirements, and community acceptability. R 4 ACMENT 1 Resolution No. (2007 Series) Page 2 SECTION 3. At least every five years,the City will evaluate its compensation structure, programs, and policies to assess market competitiveness, effectiveness, and compliance with State Law. Adjustments to the compensation structure may be made as a result of this periodic evaluation and will be done through the collective bargaining process, if applicable, or other appropriate Council-management processes. Upon motion of , seconded by , and on the following vote: AYES: NOES: ABSENT: the foregoing resolution was adopted on February 6, 2007. Mayor David F. Romero ATTEST: Audrey Hooper, City Clerk APPROVED AS TO FORM: C�;an�PLowell, City Attorney %i IIIIIIIIIIII�� III�I - council memoizanoum cit .of s.xn Luis ot;is_o, Aoffil stuatloii 0E aatment DATE: February 6, 2007 RECEIVED TO: City Council FEB 0 6 2901 FROM: Ken Hampian, CAO SLO CITY CLERK SUBJECT: Recommendation to Continue Item C-5 With regard to Item C-5, the proposed Compensation Philosophy, Council Member Carter has expressed a concern that the proposed draft does not consider the local private sector labor market. As such, he wishes to modify the proposed wording in Section 2B to add a sentence that would read, "The City will also consider local private sector employers." Rather than adding such language tonight, I am recommending that we continue the item to allow the staff to develop further information about the idea of surveying the local private sector market. There are potentially a large number of practical and analytical challenges associated with trying to do this, and these issues should be fully explored and discussed. At the same time, there is a strong interest in considering the private sector market by at least one Council Member, and this question has been raised by others in the community. Therefore, I would like to properly respect this interest, and take a little more time to research and address the issue. While a written compensation philosophy is overdue, it isn't a matter of urgency at this time. Therefore, I would prefer to reschedule the item for consideration after more information has been developed and when we have more time to fully discuss the matter. COUNCIL .ErtoD DIR RED FILE ICAO FIN DIR �-ACAO _ ¢.FIRE CHIEF M STING AGENDA O'ATTOANEY ZPW DIR ,�CLERK/dRld (� POLICE CHF DA ITEM # 0 DEPT EA[)$ fREGDIR �-` SHA DIR FiR DIR,__.._.. Comp Philosopy Continued